Abstract
This thesis presents an economic analysis of the electricity industry in Iran. The first three chapters of this study deal with a detailed examination of the industry, the theory of efficient electricity pricing and the policy implications for Iran. The next three chapters are concerned with efficient electricity production. They consist of a survey of the methodology, previous studies, empirical applications and discussion of the policy implications. The completed thesis comprises seven substantive chapters. This study not only provides efficiency scores for the Iranian electricity industry relative to the efficient frontier for electricity production, but also as a by-product, an efficiency comparison of the electricity industry in 26 developing countries. The average level of technical efficiencies in the electricity industry of these developing countries, the Iranian power plants and regional distribution organizations are estimated at 77%, 72. 7% and 81% respectively. They are based on a two-year panel data of 26 developing countries, six-year unbalanced panel data of thirty Iranian power plants and one cross-section of thirty distribution organizations taken in 1995. This thesis utilizes two popular techniques; Stochastic Frontier Analysis (SFA) and Data Envelopment Analysis (DEA). The use of both SFA and DEA extends the capabilities of addressing issues in ways that would otherwise not be available. Econometric models using panel data are employed to investigate technical inefficiencies. The Malmquist index approach is applied to investigate technological change, technical and scale efficiency changes in the electricity industry in the sample of developing countries as well as Iranian power plants. The DEA efficiency scores are used in Tobit models to determine which factors are the main causes of inefficiency. The information obtained using all these approaches will enable policy makers to find ways of raising efficiency levels. This study may prove to be a useful reference in efficiency measurement and electricity pricing in the Iranian economy. The results may have wider applicability because the Iranian electricity supply industry resembles many other developing countries.